July 15 (Bloomberg) -- Brent crude declined to the lowest
level in more than three months as supply threats in Iraq
abated. West Texas Intermediate crude fell to a two-month low
ahead of inventory data.

Brent dropped as much as 1.2 percent in London. Supplies
from Iraq remain unaffected by an insurgency while Libya seeks
to boost exports after two ports reopened. U.S. gasoline
stockpiles probably increased to the highest since March and
distillate supplies also rose, a Bloomberg News survey shows
before an Energy Information Administration report tomorrow.

“For crude generally, what you are seeing is a correction
from the highs of the Iraqi crisis as expectations around a
possible supply disruption reversed course,” Harry
Tchilinguirian, head of commodity markets strategy at BNP
Paribas SA in London, said by e-mail.

Brent for August settlement dropped as much as $1.30 to
$105.68 a barrel on the ICE Futures Europe exchange, the lowest
since April 7, and was at $105.96 at 1:13 p.m. London time. The
contract expires tomorrow. The more-active September futures
were 79 cents lower at $106.92. The European benchmark crude
traded at a premium of $5.68 to WTI, compared with $6.07
yesterday.

WTI for August delivery fell as much as 85 cents, or 0.8
percent, to $100.06 a barrel in electronic trading on the New
York Mercantile Exchange, the lowest since May 12. The volume of
all futures traded was about 86 percent above the 100-day
average for the time of day. Prices have advanced 1.8 percent
this year.

Crude Stockpiles

The discount on front-month Brent contracts widened to more
than $1 a barrel for the first time in four years. A discount,
or contango, on immediate deliveries typically signifies that
supplies are outpacing demand.

WTI has declined the past three weeks as oil supplies
expanded at Cushing, Oklahoma, the delivery point for New York-traded futures. Crude inventories nationwide probably shrank by
2.5 million barrels to 380.1 million in the seven days ended
July 11, according to the median estimate in the Bloomberg
survey of nine analysts.

“The key focus will be the EIA numbers,” David Lennox, a
resource analyst at Fat Prophets in Sydney, said by phone today.
“The U.S. drive time looks solid but not as good as we were
anticipating. The market has lost interest in the Middle East
and that’s why we’ve seen a weakening in prices.”

Distillate stockpiles, including heating oil and diesel,
climbed by 2 million barrels last week, the survey shows before
tomorrow’s report from the EIA, the Energy Department’s
statistical arm. U.S. gasoline stockpiles probably increased by
900,000 barrels. The industry-funded American Petroleum
Institute in Washington will publish separate data today.

Iraq Supply

In Iraq, fighting remains concentrated in the north, where
militants from a breakaway al-Qaeda group known as the Islamic
State captured the city of Mosul last month. The conflict hasn’t
spread to the south, the source of more than three-quarters of
output from OPEC’s second-largest producer.

Libya, also a member of the Organization of Petroleum
Exporting Countries, is preparing to resume shipments from the
Es Sider and Ras Lanuf terminals that were handed over last week
by rebels seeking self-rule in the nation’s east.